The Politics of Industrial Renaissance

So who's for reviving American manufacturing? American manufacturers? Well, some of them, under certain conditions. The American people? Most of them, under most conditions. The American government? Well, parts of it. Sometimes.

Reviving American manufacturing may be an economic and strategic necessity, without which our trade deficit will continue to climb, our credit-based economy will produce and consume even more debt, and our already-rickety ladders of economic mobility, up which generations of immigrants have climbed, may splinter altogether. That's no guarantee, however, that American manufacturing will actually be revived. The forces arrayed against it -- chiefly, finance and big retailers, Wall Street and Wal-Mart -- have tremendous political clout.

The epochal shift that's overtaken the American economy over the past 30 years -- from making things to making debt -- is not easily reversed. The two main economic sectors to have profited by that shift -- finance, which has compelled manufacturers to move offshore in search of higher profit margins, lower wages, and fewer regulations; and retailers, who have compelled manufacturers to move offshore in search of lower prices for consumers and higher profits for themselves -- have a clear interest in perpetuating the current economic order. Time was when the largest American private-sector employer was General Motors, which paid its workers enough for them to buy its product. Today, the largest American private-sector employer is Wal-Mart, which pays its workers so little that they are compelled to shop at Wal-Mart and take on levels of debt that have swelled the big banks' coffers.

Creating the better paid, less debt-ridden work force that would emerge from a shift to an economy with more manufacturing and a higher rate of unionization would reduce the huge revenue streams flowing to the Bentonvilles (Wal-Mart's home town) and the banks. And as retail and finance have grown, so has their political power. The campaign contributions from the financial sector to Democrats and Republicans alike now dwarf those from manufacturing -- a major reason why our government's adherence to free-trade orthodoxy in what is otherwise a mercantilist world is likely to persist.

You might think that American manufacturers, at least, would seek to defend domestic manufacturing. But the majority of major manufacturers have already offshored much of their production. Earlier this year, President Barack Obama sided with a complaint brought by the United Steelworkers against China, which by flooding America's low-end tire market with its exports was costing American jobs. By the terms of the trade agreement we reached with China in 2000, the president is allowed to mitigate the effect of this kind of import surge by imposing a temporary tariff, which is just what Obama did. What was striking in the Steelworkers' complaint, however, is that no U.S. tire manufacturers joined it. The problem was that almost all the tire makers with plants in the United States -- Bridgestone, Cooper, Goodyear, Michelin, and Pirelli -- also have factories in China. Worse, the Chinese government often requires them to export all the tires they make in China (Cooper recently opened a factory under just such a mandate), essentially compelling them to defend their Chinese factories over their American ones.

So if finance, retail, and much of American manufacturing won't stand up for American manufacturing, that leaves only the American people among those willing to take that stand. In 2006, Frank Luntz, the Republican pollster, conducted a survey for the Public Policy Fund that showed support for manufacturing was broad and, among some groups of Americans, deep. More Americans (88 percent) called manufacturing extremely or very important to the American economy than those who assessed services (70 percent), finance (69 percent), or information (69 percent) the same way. But while Americans believed we led the world in services, finance, and information, they believed by an overwhelming margin (72 percent to 23 percent) that we no longer led the world in manufacturing. Luntz's respondents were plainly unhappy that America had lost its lead: Asked to choose between leaving manufacturing to other nations while we focus on cultivating our service and professional sectors, and fostering domestic manufacturing because it spurs economic growth, 81 percent chose the latter.

That's not to say that the public's backing of governmental support for manufacturing is a slam dunk, as the opposition to the General Motors and Chrysler bail-outs made clear. Luntz's survey, unsurprisingly, showed that public support rises when the manufacturing in question is high-tech and futuristic (never mind that many GM and Chrysler factories, if not the cars themselves, are precisely that). But at a time when the finance-led economy of the past quarter-century is in a shambles, the opportunity to promote more investment and manufacturing in America has clearly emerged.

At one level -- certainly, the level of rhetoric -- President Obama knows this. "We cannot rebuild this economy on the same pile of sand," he said in a speech this April. "We must build our house upon a rock. We must lay a new foundation for growth and prosperity -- a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad."

To its credit, the Obama administration has directed billions of dollars in its stimulus package to such clean-energy industries as electric-car battery factories. It has appointed Ron Bloom, who represented the Steelworkers throughout the restructuring of the steel industry and then served on the administration's auto task force, to coordinate its efforts to jump-start manufacturing. It has levied the tariff on Chinese tires. But it still shuns the words "industrial policy," and, more important, it largely shuns the substance of industrial policy as well. It opposed domestic content requirements in its stimulus legislation and has offered scant opposition to China's ongoing manipulation of its currency, which boosts Chinese manufacturing and decimates ours and much of the rest of the world's.

Other Democratic leaders have gone well beyond the president in their support for efforts to bolster manufacturing, none more than Sen. Sherrod Brown of Ohio. A rising star in the liberal firmament, Brown was elected to the Senate in 2006 after a campaign in which he stressed the need for a trade policy that benefited Ohio workers rather than Chinese industrialists and American financiers. Today, he is beating not only that drum but the industrial policy one as well. The case for manufacturing, he says, "appeals to a broader section of the public than trade does. When I say we should do more training for manufacturing workers, help the alternative-energy industry, file more 301 cases [which prohibit foreign companies from dumping subsidized products on American markets], I only get push-back from the anti-big-government guys."

"It's made new friends for me," Brown continues. "Not Democrats, necessarily, but people who understand that this guy is fighting for manufacturing. That's a plus, especially when it's manufacturing related to national security." (Luntz's 2006 survey showed, in fact, that respondents who voted for George W. Bush in 2004 were more concerned than those who backed John Kerry about the offshoring of military-related manufacturing, though heavy majorities in both categories opposed the practice.)

Brown says he's "working with the White House" on a program to help domestic manufacturing, which would make permanent the tax business credit for research and development and help auto-parts plants convert into alternative-energy technology factories. (The Waxman-Markey climate-change bill, which has passed the House, authorizes $30 billion in loans over two years for that purpose.) He's authored a bill to alter worker-training programs so that local boards can match the curricula to the local economy. And he continues to promote a trade policy that helps rather than hinders domestic production.

While Brown believes that promoting manufacturing presents a clear political opportunity for Democrats, he acknowledges that as manufacturing employs a steadily smaller share of the American work force, "younger people probably don't think about it as much" as their elders -- an impression that Luntz's survey confirms. Politically, American manufacturing is in a race against time: As manufacturing becomes more alien to a growing number of Americans, its support may dwindle, even as the social, economic, and strategic need to bolster it becomes more acute. That makes push for a national industrial policy -- to become again a nation that makes things instead of debt, to build again our house upon a rock -- even more urgent.